Former prime minister and treasurer Paul Keating has come to the defence of tax changes in the federal budget, while one Labor premier says workers are still paying too much.

Keating said the budget’s capital gains tax changes were “structurally sound”, despite concerns from business owners it could stifle investment.

The Albanese government’s fifth budget replaces the 50 per cent discount on capital gains held for more than a year with a rate based on inflation.

Real gains would be taxed at a 30 minimum rate, prompting concerns from businesses and start-ups.

Keating said the changes were required to make housing more affordable, dismissing concerns it would hamper businesses in the process.

“Punters with a big idea won’t be put off by some marginal change to the tax rate. The rush of entrepreneurial blood to the brain always dominates,” he said.

“The point is, a society that fails to house its children is a society in decline – this is what [Treasurer] Jim Chalmers and his Prime Minister [Anthony Albanese] are seeking to arrest.”

Keating, who was treasurer as part of the Hawke government, said his introduction of the capital gains tax in 1985 was to address distortion in the system.

“This brought the taxation of income and capital to a concomitant point of equality – and for the first time in our history,” he said.

“But in the face of this achievement, a couple of smarties, John Howard and Peter Costello, thought they could do their used car selling and dodgy accounting mates a favour by jacking a 50 per cent discount on to the taxation of capital profits.”

The Howard government introduced the 50 per cent capital gains tax discount in 1999.

Nationals senator Bridget McKenzie said Keating’s defence showed the government’s budget sell to the public had not gone well.

“You know something’s wrong when you have to wheel out Paul Keating to stick up for your budget. A lot’s changed, Mr Keating, in the quarter of a century since you were in charge of the Treasury,” she told Nine’s Today program on Thursday.

“What you’re seeing with the reaction of this budget is everyday Australians are working so hard to get ahead, feel like Chalmers is coming after them.”

It follows NSW Labor Premier Chris Minns calling for more action from the federal government on income tax, including cutting the top tax rate of 47 per cent.

“We do need to make sure we’re taking urgent action when it comes to personal income taxes, because at the moment a lot of working families are getting stung,” he said in Sydney on Wednesday.

“The top marginal rate of 47 per cent … you’re working Monday, Tuesday, and half of Wednesday for yourself, and then [the rest of] Wednesday, Thursday, and Friday for the government.”

That tax rate actually applies only to income earned over a worker’s first $190,000, leading Chalmers to suggest Minns didn’t understand the income tax system.

“That’s not how marginal tax rates work,” he said on Thursday. “This is a government which is cutting taxes for every Australian worker – 13.3 million Australian workers will get another tax cut from this government in the budget.”

Federal minister Murray Watt said workers would get relief with tax cuts soon to come into effect.

“The Premier and all Australians won’t have to wait long until we see the next tax cut come in place for all Australian workers, because it will happen on the first of July,” he told Seven’s Sunrise program.

“This very budget will continue delivering on the tax cuts that we took to the last election, so we’ve adjusted both the top and the bottom tax thresholds and rates.”

The tax cuts, which were introduced in the 2025 budget, would save taxpayers up to $268.

But shadow treasurer Tim Wilson said Minns was right to criticise current tax levels.

“We should find a way to reduce the top marginal rate. I absolutely believe that we should want Australians to work hard and for them to be able to keep the reward of their work,” he told ABC Radio.

“There are so many Australians right now who are working or working harder than ever, and they don’t feel like their hard work is paying off.”

-with AAP